In one infamous case, in the US bank Goldman Sachs created specific derivatives to keep debt off the books and hidden from the Greek people and EU rules. When the global financial crisis began in , lending to Greece increased to help the country cope with the impact of lower tax revenues and the need for higher government spending. Foreign banks were particularly keen to lend to governments such as Greece, because governments were now seen as safe compared to their fellow banks.
In the Spring of , lenders began to finally lose confidence in the ability of the Greek government to pay its debts. The government admitted that it could no longer afford to make debt payments, but rather than defaulting, it took bailout loans from the IMF and EU. These new loans were used to pay-off the reckless banks, whilst keeping and increasing the Greek debt. In return they insisted on a widespread austerity programme, which contributed to the economy crashing even further.
In the IMF, EU and lenders accepted that the debt was too big, and negotiations began between the Greek government and private lenders to reduce the amount of debt they were owed. A deal was finally reached in March , which reduced the amount of debt owed to private creditors. However, this did not cover any of the debt owed to the IMF and EU, including bonds bought by the European Central Bank, which otherwise would have been covered. It treated Greek and foreign creditors the same, making big cuts to Greek pension funds and banks, necessitating more bailouts and thereby more debt for the Greek government.
Debts owed under UK law were not covered, after the UK government refused to enforce the debt restructuring. And the deal still meant that lenders got back more money than if they had sold their debt on the market. That's just not how the IMF plays its game.
Greece has to repay part of the IMF loan by March. We're no longer maintaining this page. CNNMoney Sponsors. SmartAsset Paid Partner. These are your 3 financial advisors near you This site finds and compares 3 financial advisors in your area Check this off your list before retirement: talk to an advisor Answer these questions to find the right financial advisor for you Find CFPs in your area in 5 minutes. The proposed measures include many elements rejected by Greek voters in a referendum last Sunday,.
What exactly is happening in Greece and why has the country found itself in the current crisis? Here are the key numbers you need to understand what's going on. Although other, smaller European countries like Slovenia and Malta have far more to lose when the debt is expressed as a share of the country's GDP. While the IMF says Greece is "in arrears", the European Financial Stability Facility - a body established in to help resolve the eurozone crisis - says that constitutes a default.
Following the referendum, Eurozone finance ministers now say they expect to hear new proposals from Greece. Critics point out that Greece's problems can be traced back to before it joined the euro in , when it was living beyond its means.
After it adopted the single currency, public spending soared. The eurozone is worried the country won't be able to pay the money back. But the eurozone is not the only group that Greece owes money to. A lot of people, including governments across Europe lent Greece a huge amount of money.
What's happening now is that some of those debts are due.
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